Lear could raise as much as $2.5 billion to buy its rival
DETROIT — In a move that could create a powerhouse in the cutthroat automotive interiors business, Lear Corp. is considering a bid for bankrupt Collins & Aikman Corp.
Last week, sources close to Lear confirmed that the supplier is studying a possible bid for Collins & Aikman. The sources said Lear might buy part or all of Collins & Aikman.
Analysts say the acquisition of Collins & Aikman could give Lear economies of scale. Troy-based Collins & Aikman makes cockpit modules, instrument panels, flooring, and acoustic systems and trim. Lear makes many of the same products.
Weighed down by a tangle of unprofitable contracts, Collins & Aikman filed for bankruptcy protection on May 17.
But its status as one of North America’s largest interiors suppliers makes it too important to fail. Last week, automakers earmarked $200 million to keep Collins & Aikman in business through September.
Lear is not the only company eyeing Collins & Aikman. On Aug. 8, Plastech Engineered Products Inc. of Dearborn announced its intention to buy Collins & Aikman for up to $1 billion.
Plastech continues to pursue Collins & Aikman. “They’re strategic” to Plastech, said a source familiar with Plastech’s strategy. Plastech has “been trying to get into instrument panels and doors for a while. Collins & Aikman does instrument panels and doors, so that would be core” to Plastech.
The source said Plastech was approached by an automaker he declined to identify and encouraged to make a bid for Collins & Aikman, a move seen as evidence of just how important Collins & Aikman is to the automotive industry.
“Some interested people in this process approached Plastech because they don’t see Collins as a longtime viable entity,” the source said. “That’s why they are doing it. Not just for the fun of it. They think having Collins & Aikman is good for them in the long term."
Lear can afford to buy Collins & Aikman. With North American original-equipment parts sales of $9.28 billion in 2004, Lear ranks No. 5 on the Automotive News list of the top 150 suppliers. With sales of $3.90 billion, Collins & Aikman ranks No. 11.
Together, the two companies would become North America’s largest interiors supplier, with combined sales that could total $13.19 billion.
Under certain circumstances, Lear could raise as much as $2.5 billion to buy its rival, according to company documents filed with the Securities and Exchange Commission.
Moreover, much of Lear’s interiors business overlaps that of Collins & Aikman.
In theory, a larger interior trim division would allow Lear to demand lower prices for resin, the raw material for most interior trim.
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